Question1:
Daniel, an executive of an American multinational company, Mining Capital Corporation, was offered an opportunity to grow an operation in a subsidiary of the multinational in Australia from 1 November 2016.
Daniel rented out his family home in Malaysia and moved to Australia as his wife joined him and their son was admitted to a University in Michigan, US. The family maintained a similar lifestyle when they moved to Australia.
Daniel's wife is a dental surgeon and secured a job in Perth, which she started two months after arriving in Australia. Daniel and his wife are enjoying the climate in Australia and after their son visited Perth from the US, the family decided to apply for their Australian permanent resident visa in May 2017.
The couple has an equal share in all their savings and investments. Their income and expense particulars for the year were:
1. Annual salary of $250,000 plus superannuation.
2. A rented house in Perth, paid by Mining Capital, which usually, is rented for $40,000 per annum.
3. Interest from Australian bank accounts of $3,000.
4. Interest from Malaysian bank accounts of $8,000.
5. Rental income of $24,000 from the property in Malaysia.
6. A bonus incentive of $15,000 paid by Mining Capital for having moved to Australia.
7. An allowance of $20,000 paid by Mining Capital which covered all flights and moving expenses from Malaysia to Perth.
8. Deductions of $2,500 for work related expenses paid by Daniel.
9. Dividends from Mining Capital shares of $5,200, unfranked.
10. Dividends from BHP shares of $5,000, with a franking credit attached of $2,142.
Daniel had to travel to Malaysia to attend a number of meetings which meant he had to stay in Malaysia for three months for the tax year ending 30 June 2017.
Daniel approaches you at Abacus Tax Accountants and would like your advice on his tax position for his 2016/ 2017 tax year and what tax consequences he may have in the following year 2017/ 2018.
(i) Determine whether Daniel would be taxed as a resident or non-resident for tax purposes in 2016/ 2017 applying the residency and source factors.
(ii) Calculate the tax payable by Daniel for the 2016/ 2017 financial year based on your answer in (i). Ignore the Medicare levy surcharge in your calculation.
Question 2:
Escape Vacations Pty Ltd is a Perth holiday destination company that sells holiday packages.
(a) Joyce, is an Australian resident for tax purposes and is employed at Escape Vacations as a Marketing manager. Joyce has two kids, namely Zari and Luke.
The following details were either included in Joyce's contract of employment or agreed with her for the full FBT year with Escape Vacations:
1. Salary of $150,000 plus a superannuation benefit of 9.5%.
2. Payment of Zari's and Luke's school fees, $15,000 each per year. The school fees are GST free.
3. As Joyce is a Marketing manager, she was required to travel to six potential clients per year to select holiday destinations, which had cost Escape Vacations $40,000 including GST.
4. $750 paid to the Marketing Institute of Australia for Joyce's professional membership, GST inclusive.
5. Use of a car, which travelled 20,000 kms for the year. Since Joyce had personal use of the car, she was required to contribute $150 per month. Based on the car's log book details, Joyce had used the car privately for 8,000 kms during the year. The car was leased by Escape Vacations from 1 July 2015 at $600 per month, when the car was for sale at $35,000 including GST.
Other expenses relating to the car paid by the Company for the year including GST:
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Fuel per month
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$200
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Servicing
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$300
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Registration
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$750
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Insurance
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$700
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6. Escape Vacations pays $24 per month towards Joyce's gym membership, including GST.
7. Payment of $75 (including GST) towards Joyce's mobile phone which she uses solely for work purposes.
8. An IPad which had cost Escape Vacations $1,100 (including GST).
9. Entitlement to a Virgin Airlines Gold Membership lounge to the value of $550, including GST, which Joyce also uses on private trips. 80% of her trips during the year were of a business nature.
10. Joyce was provided with a loan of $22,000 on 1 July 2016 at zero interest rate, which she had used to renovate her main residence.
Joyce was paid a bonus of $12,000 after tax on 31 December 2016 which was deducted from her salary to repay part of the loan. On 28 February 2017 Joyce became the Marketing director of the company and Escape Vacations advised Joyce that she was no longer required to repay the remaining balance.
(i) Analyse the above transactions and determine whether there are any FBT or income tax implications.
(ii) Calculate the FBT liability for the FBT year.